land, if necessary ;) and by the excellence of their management, they have not only essentially benefited their country, but enriched themselves.

SECOND PRIVATE, OR PROVINCIAL BANKS.

In Scotland, there are no restrictions in regard to the number of partners in a banking establishment, issuing notes. It may consist of one, or of a thousand proprietors. This is certainly going too far; for the security of one, two, or three individuals must always be precarious; and the greater the number of partners, the less is the risk of fraud. One man may do, what it would be difficult to persuade twenty to concur in. This error, though it has not hitherto occasioned any material public injury, ought to be corrected by law.

It is a great advantage, however, attending the Scotch system of banking, that there is no precise limit to the number of partners who can join in the same concern. Thus, numbers being interested in the prosperity of the bank, its circulation and credit are augmented; and a greater quantum of prosperity being involved in the concern, there is hardly any possible risk of public loss.

There are, in Scotland, besides the three chartered banks, twenty-six private banking establishments, issuing promissory notes. Several of these have branches situated at a considerable distance from the mother bank.* The number of partners, exclusive of the three chartered banks, may be stated at 1400, or, on an average, 53. One (the Commercial Bank of Scotland,) has no less a number than 606 partners; others, where the business is small, have only two or three.

In order to give an idea of the excellent management of the Scotch private or provincial banks, the following account of the Aberdeen bank has been procured.

This bank was established in 1767, with a nominal capital of £100,000, in two hundred shares, of £500 each.

The number of banks in Scotland, public and private, is 29; but they have, in all, about 100 branches, scattered over the whole kingdom, emanating from them.

Only £150 per share, or £30,000 in all, were originally paid in; and no future call has, ever since, been made on the partners. The annual dividends were, at first, £20 per share; for many years they were £40, and they are now £60.

Instead of any extra dividends, it has been the usage to add a bonus to the stock of each partner. In this way, not only has the original capital of £500 per share been paid up, but also the capital since it has been doubled, for it now amounts to £1000 per share. The partners were originally about 160 in number; and in the first contract, the number of shares to be held by each individual was limited. But when the contract was renewed, that clause was done away. The number of partners is now about 80. Several shares stand in the name of the company.

The highest price hitherto given for any share, has been £1,500; and the price varies from that sum down to £1,400, according to the opinion of the parties buying and selling at the time.

A very large sum, now only at 3 per cent., has been lodged with the bank, in consequence of the high idea entertained of the prudence and good conduct with which the affairs of the company are managed. The directors are thus enabled to be sufficiently liberal in the credits they give, and the loans they furnish, to the commercial, manufacturing, and agricultural interests.

Among the unchartered establishments, "The Commercial Banking Company of Scotland" ought to be particularly mentioned, as it is distinguished, not only by the number of its partners, (606,) but by the spirit and success with which its operations are conducted. It commenced business on the 25th of March, 1810, with a capital of three millions, of which it has only been necessary to call for £500,000. Its dividend is at the rate of six per cent., and its stock already sells for £150 per share. Its profits could afford a larger dividend, but it prefers laying up an annual sum, to guard against contingencies.

It would be in vain attempting, in a short work of this description, to enter into the details of the management of these most valuable institutions. But I cannot deny myself the satisfaction of explaining the public advantages desirable from these establishments, including the chartered companies.

1. From the licenses the private companies are obliged to take out, and the stamps on the notes of both the chartered and the unchartered banks, considerable sums are received by government.

2. They are of great use to private individuals, furnishing them with a place of security, where they can safely deposit small, or even large sums; receiving for them a moderate interest, formerly at the rate of 4 per cent., but now reduced to 3 or 3 per cent. The whole, however, or any part of the sum thus placed, can be obtained whenever it is demanded. The result is very satisfactory. These deposits in the various Scotch banking establishments amount, in all, to several millions sterling, (from 15 to 20 millions,) and thus the banks are enabled to be of greater use to the industry of the country, than if they relied upon their own capitals alone.

3. The advantages derived from these establishments by the agriculture of Scotland, is of the highest importance. The celebrated Sir James Stewart, in his work on Political Economy, says, "To the banks of Scotland the improvement of that country is entirely owing."*

4. In common with all other such institutions, the banking establishments of Scotland are highly favorable to commerce and manufactures, enabling them to be carried on to an extent which would otherwise be impracticable. This has been greatly owing to the banks giving what are called CASH ACCOUNTS. Credits of this kind are frequently granted

* Stewart's Political Economy, last ed. vol. iii. p. 197. Without going so far, it may be safely asserted, that to the improvement of Scotland they have essentially contributed.

by banks and bankers in other countries. But the readiness with which money is advanced without the intervention of bills, and the easy manner in which these banks accept of repayment (discounting the interest as each sum as paid in) are peculiar to them. The operations on such credits are principally carried on by making of drafts, or passing of checks, as if the banks held money of the dealers. The system of cash accounts, conducted as it is in Scotland, has been the principal cause, both of the great trade of the banking companies there, and of the great benefits which the country has derived from them.

5. These banks are of much use in collecting the great revenue which Scotland, for so small a country, produces, and afterwards remitting it to the English treasury.

6. The number of banks is a great check upon the forgery of notes, which can hardly escape speedy detection, from the rapidity with which they immediately return to the bank, or the branch that issued them.* And

In the last place, a number of banks is a great means of securing an adequate limitation. No bank, with a number of rivals, can issue notes beyond the real demand; for they immediately revert on the issues. No inordinate circulation can take place where the several banks make weekly exchanges, and receive payment of the balances in cash, or by bills, at short dates on London.

But the most extraordinary circumstance is this, that with twenty-six banks issuing notes, there has not been, since the year 1776, a period of fifty-six years, a single failure, with the exception of one, where the stopping occasioned any general alarm, as is so frequently in England or Ireland; or

• The more extended the circulation of a bank, the more liable it is to have its notes forged.

+ This was the Ayr Bank, or Douglas, Heron, and Company, which stopped in the year 1772, but which was never declared bankrupt, and which ultimately paid all its notes and other demands upon it. The ruin of that bank was owing to the grossest mismanagement; and its failure occasioned a general alarm and much private distress.

any discredit thrown on the other banks by whom notes were issued. As to public loss, hardly any has been experienced, even where a stoppage did take place, of which, in fifty years, there were only six instances; whereas, in England, seventy-one banks stopped in one year.

On the whole the banking establishments of Scotland produce the finest specimens of practical economy to be met with in Europe: for though, in the circulation of Scotland, scarcely any gold is to be met with, yet industry, agriculture, manufactures, and commerce, flourish more than if the produce of all the mines of Mexico and Peru were circulated in it. If the same system of banking establishments which Scotland now enjoys were extended to England and Ireland, these countries possessing such a superiority of soil and climate, would rise to a degree of prosperity hitherto unexampled.

It evidently appears, from the preceding short account of the circulation of Scotland, that the advantages of which it is productive is a matter not of speculation, but of experience; for it has now been carried on with almost uninterrupted success for above half a century, and during periods of considerable commercial as well as political difficulty.

It would be of great public importance, if the Bank of England adopted the plan that has been found so useful in Scotland, that of granting" cash accounts," the nature of which is this: a bond, say for one thousand pounds, is subscribed by one responsible person, and two or more sureties, to the extent of that sum; the principal in the bond is entitled to draw as he may find it necessary, and he pays in, from time to time, such sums as he receives from his debtors. The account is settled yearly, or half yearly; and the interest, at the rate of five per cent. for the sum drawn out, beyond what is periodically paid in, is charged to his debit in the new account. It is calculated in the Scotch banks, that about one third part of the sum advanced to their customers, is issued on cash accounts. This furnishes a most useful means of augmenting